IMF chief: Protectionism will hurt Asia if it goes beyond words

TOKYO Protectionist sentiment has not yet gone beyond mere words, International Monetary Fund (IMF) managing director Christine Lagarde said yesterday, but it will hurt Asian economies with open and free markets if it did.

Ms Lagarde brushed off the concerns of some investors that the divergent monetary paths of major central banks could disrupt Asian capital flows, stressing that policymakers had the means of communication needed to prevent market upheaval.

Global policymakers have raised concerns over US President Donald Trump's America First agenda that aims to slash US trade deficits, via which Washington appears to be walking away from or extensively renegotiating multilateral trade arrangements in favour of country-by-country deals.

"If there was protectionism, it would hurt economies that are very open, and based on free and fair movement of goods and services," the IMF chief told Reuters during a visit for the 20th anniversary of the IMF's Asia-Pacific regional office in Tokyo.

"To continue to have trade as a global engine for growth, trade deals need to be improved," she said, adding that trade pacts had to include rules on labour practices and intellectual property.

She said trade deals must be "rules-based" and make use of existing dispute-settlement mechanisms such as the World Trade Organisation, though she declined to say whether Mr Trump's trade policies complied with these rules.

Ms Lagarde said there had been no massive capital outflows from Asia thanks to central bankers' cautious approach and clear communication around their policy shifts.

"We believe these conditions can help to ensure that monetary policy changes do not provoke unnecessary capital flow movements," she said. - REUTERS